Friday, August 05, 2005

Congress just made it easier for states like Texas to build new toll roads.

President George W. Bush is expected within the next few weeks to sign the $286 billion federal transportation bill, HR 3, which passed July 29.

Several different provisions give states the flexibility to enter into public-private partnerships to build highways, and in many cases, toll roads. Their enactment represents a fundamental shift in the way state and federal highways are typically financed.

* Private activity bonds. The bill allows states to issue up to $15 billion in tax-exempt private activity bonds (PAB) to privately finance toll roads and railroad projects. PABs allow state and local governments to issue bonds that will be repaid by a private entity.

This approach was championed by Congressman Sam Johnson (R-Plano) who had unsuccessfully tried to pass the measure in the 108th Congress.

* Transportation development credits (toll credits). The bill expands the states’ eligibility to apply for toll credits. The law currently prohibits states from receiving toll credits if a portion of federal government dollars was applied toward the construction of a state toll road. Toll credits are typically used, instead taxpayer dollars, to match federal funds for transportation projects.

“This is an unfair penalty,” explained Congressman Michael Burgess (R-Flower Mound). “It must be changed to properly recognize the local and state share of investments meeting our transportation needs.”

A Burgess-sponsored amendment eliminates this restriction. The measure would allow states that use federal money to build toll roads to accrue toll credits on a pro rata basis. Expanding the use of toll credits effectively frees up state matching dollars for other transportation programs.

Minnesota Democratic Congressman Jim Oberstar expressed concern that the amendment gives states incentives to toll new roads. “This amendment really crosses the line on tolling…to mix federal funds with tolls is anathema to the idea of a publicly supported transportation system through our Highway Trust Fund and the user fee,” he said. “I could understand if the gentleman from Texas (Burgess) were advocating and others were advocating tolls and toll-only facilities. But to cross the line and mix Highway Trust Fund dollars with toll funds to encourage building of toll facilities to indirect competition with toll-free highways, just does not make any sense at all.”

Fellow Texas Congressman Kenny Marchant (R-Dallas) defended Burgess’s amendment. “Under current law, even if $1 of federal money is spent towards a state toll project, no transportation development credits will be accrued by the state,” explained Marchant. “In other words, not only does the federal government punish states for investing in toll facilities, it also prevents them from using transportation development credits which would have been accumulated for the use and purchase of transit capital such as buses and transit cars.”

Sal Costello, founder of the grassroots anti-toll organization called Texas Toll Party, agreed to disagee, calling the measure a “tax and toll proliferation” bill. The Burgess amendment, he said, “gives states more credit for tolling publicly funded roads, which is upside- down in most people’s opinion.”

* More tolling options. HR 3 extends the federal pilot program that allows eligible states to convert existing free Interstate highways into toll roads. A state must show that the Interstate is in need of reconstruction or rehabilitation and that collection of tolls is the most efficient and economical way to complete the project.

The program, which be began in 1998, can award up to three projects. Currently, only Virginia has applied for the ability to toll I-81.

HR 3 also creates the Fast Lanes & Sensible Toll Lane (FAST) Program in which states can toll existing free highways to relieve congestion, improve air quality and finance construction of additional Interstate lanes. The measure requires express tolls be completely automated using electronic transponders. Eligible facilities include tolled roads, roads that are not tolled but have High Occupancy Vehicle (HOV) lanes, or non-tolled roads where new toll lane capacity is added.

According to TxDOT, the program will help with the development of projects such as Loop 1604 in San Antonio, State Highway 121 in North Texas, the Grand Parkway in Houston, and portions of the Trans-Texas Corridor.

A state that takes part in the FAST program could charge varying toll prices according to the time of day or level of congestion. This kind of system is in use in Orange County, California.

* Design-Build method. The legislation allows states to combine the design and construction of a toll road project into one contract. Most states currently use the traditional “Design-Bid-Build” method that requires separate contracts for each phase of a construction project, a procedure that state officials say is often costly and time consuming.

The bill removes federal restrictions on state procurement procedures for Design-Build contracts, allowing the work of property acquisition, design and construction to be undertaken simultaneously.

Texas is one of only 15 states experimenting with the Design-Build method in procuring highway contracts. Texas’ first public-private partnership, under a comprehensive development agreement, is the State Highway 130 project. Construction of the 90-mile toll road is currently underway. The $1.4 billion project will run parallel to I-35, from Georgetown to Seguin, near San Antonio.

* Rate of return. Texans pay more in federal gas taxes than they get back from Washington, D. C. The legislation increases the rate of return by an additional $800 million in federal funding through 2008.

Although most of the Texas delegation voted for HR 3, Sen. John Cornyn opposed it, saying Texas was still getting shortchanged. “The truth is,” Cornyn said, “Texas remains penalized as a donor state - that is for every dollar we send to Washington, under this bill Texas only gets 92 cents back.”

Currently, the rate of return is at 90.5 percent or about $2.1 billion. That figure will increase to 92 percent or nearly $2.9 billion in 2008.

Senator Kay Bailey Hutchison conceded that 92 percent was not enough, but voted for the bill anyway. “The increased rate of return to 92 percent by 2008 will be the starting point when we consider the next highway authorization bill,” Hutchison said. “I intend to work for a higher rate of return when we begin those negotiations. While this reimbursement rate is still not good enough, the bill provides important funding for Texas transit projects.”

* Borders and Corridors program. The legislation grants $211.8 million to Texas under the Borders and Corridors program. The program is designed to address transportation issues along the Canada-U.S.-Mexico border.

The North American Free Trade Agreement has led to increased commercial trade traffic on Texas roads and highways.

According to the state Department of Transportation, 80 percent of U.S.-Mexico truck traffic crosses the Texas border. The most used corridor routes in Texas are I-35, I-69, US 59 from Laredo to Texarkana, US 281 and US 77 to the Valley, the Ports to Plains corridor, and the El Camino Real corridor, which includes the portion of I-10 through El Paso.

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